Supply Chain Constraints Faced by vegetables Retailer in Bangladesh

Summary
Supply chain management is a powerful tool to achieve this collaboration. Throug
h supply chains, producers in developing countries and emerging economies can ac
cess market information and knowledge to hone their value-added activities. The
advantages of supply chain management are numerous, like the reduction of produc
t losses, increase in sales, reduction of transaction costs, a better control of
product quality and safety and the dissemination of technology, capital and kno
wledge among the chain partners. Supply chain management tools have been develop
ed and implemented throughout the chain to guarantee optimal chain performance.
Supply chain development not only benefits the private sector but also creates s
pinoffs that stimulate social, economical and environmental sustainable developm
ent in the region (employment generation, added value, decreases of product loss
es, etc.). Public support (e.g. development of the institutional infrastructure)
plays an important role to create an enabling environment for private sector de
velopment. Public support might take the form of a public private partnership in
a supply chain to share experiences, risks and bottlenecks. In Bangladesh howev
er, supply chain development is often hampered due to lack of governmental suppo
rt. Institution building, raising awareness, pilot chain projects and the develo
pment of a toolkit are important activities to foster supply chain development.
This paper reviews issues of the development of supply chains with special empha
sis on challenges for vegetables retailer in Bangladesh.

1. Introduction
Efficient agriculture marketing is critically dependent on efficient transport s
ystem. Inefficient transport service coupled with poor storage, can lead to loss
es as certain crops (such as milk, vegetable, fish) deteriorate quickly over tim
e. On the other hand many developing countries like Bangladesh suffer from monop
olistic, low volume, and high cost transport and marketing system. Weak transpor
t and marketing system are hindering agriculture development means country devel
opment. On the other hand vegetable are generally more costly to produce per hec
tor than traditional crop. The value or quality of vegetable will decrease rapid
ly once they are harvested and will keep decaying when being delivered. The reve
nue of food supplier will depend on the condition of the products when they are
received. Thus timely production and delivery of perishable foods significantly
affect the suppliers revenue. In this paper it is tried to address present supply
chain system of perishable product (especially vegetable) implication, difficul
ties to change the present system and suggestion for improvement of supply chain
.

2. Supply Chain Management and its Benefits

Managing supply chains requires an integral approach in which chain partners joi
ntly plan and Control the flow of goods, information, technology and capital fro
m farm to fork, meaning from the suppliers of raw materials to the final consumers
and vice versa. In order to react effectively and quick to consumers demand, sup
ply chain management is consumer-oriented. It aims at coordination of production
processes. Supply chain management results in lower transaction costs and incre
ased margins. Because of the many activities and aspects involved it demands a m
ultidisciplinary approach and sustainable trade relations. Supply chain partners
hips are based on interdependence, trust, open communication and mutual benefits
.
The advantages of the supply chain management approach are numerous. Some import
ant Advantages are:
Reduction of product losses in transportation and storage. I
ncreasing of sales.
Dissemination of technology, advanced techniques, capital an
d knowledge among the chain partners.
Better information about the flow of produ
cts, markets and technologies. Transparency of the supply chain.
Tracking & trac
ing to the source. Better control of product safety and quality.
Large investmen
ts and risks are shared among partners in the chain.

3. Supply Chain in Agriculture in Bangladesh

Intermediaries make link between farmer and consumer. Number of intermediaries i
n the supply chain is a function of product type, accessibility of market, etc.
Earlier studies on Bangladesh food supply chain claim that there are many interm
ediaries involvement and they are slicking off a major portion of the consumers p
rice as profit. There are five intermediaries in the major distribution channel.
Short description is as follows. Faria: Faria are small traders who dealt in pr
oduct within three or four local markets and handled a small volume of product.
They purchase product from farmer and sold that product either to the beparies o
r the consumer. They are usually landless labors or small farmers having no full
time work on the farm (Tasnoova et al, 2006). Their volume of business is small
because they a possess a little capital. Beparies: Beparies are professional tr
aders who purchase agricultural product form the farmers or farias in the local
market or in the village. They handled larger volume of product than Faria. Bepa
ri sells their product to Arathdar. Arathdar: Arathdar serve as a fixed commissi
on agent who have fixed establishment and operate between Bepari (incase of padd
y miller) and retailer and charge a fixed commission by providing storage facili
ties. Retailers: Retailers are the last link in the marketing channel. They buy
product from beparies through Arathdar and sell them to the consumer.

Figure 1: Typical existing food supply chain in Bangladesh (Sabur, 1990)

Figure 1 shows the interrelationship between intermediaries of existing supply c
hain in Bangladesh. it is observable that a bulk amount of product is transferri
ng from grower through Bepari. Bepari distribute his product to next player thro
ugh Arathdar.

3. Function of Intermediaries
The important components of marketing functions at the intermediary level are tr
ansportation, storage, grading, financing, market information, pricing etc. deta
iled description of intermediaries are described as follows: Transport: Intermed
iaries make connection between consumer and producer. They provide transport to
carry locally produced agro-product to distant market. They do the all activitie
s involved in preparation for consignment such as crating and loading. Transport
ation cost is high in Bangladesh. Intermediaries use different types of mode dep
end on the availability. Storage: The storage function is primarily concerned wi
th making goods available at the desired time. It creates time utility. Storage
requirement is crop specific. Potato and paddy can be stored for many days. But
vegetable need immediate transport to market. As vegetable and fruits are perish
able, they need proper post harvesting treatment before reaching market. If sell
er cannot sell their product in same day, they need to storage these products fo
r the following day. Grading: Grading is one of the basic functions of intermedi
aries and it is defined as the classification of product according to some stand
ard on measure (Kohlset al, 1980). Grading is a determining factor of buying and
selling price. Quality is determined by eye estimation. For fruits and vegetabl
e grading is done by bairal. Packaging: Packaging is an important job of interme
diaries. Wastage largely depends on packaging. Packaging materials depends on ty
pe of crops. Fresh fruits and vegetables are generally packed in bamboo baskets,
plastic crates, plastic bags, or nylon sacks for transportation, in Bangladesh.
Sometime, they are transported in an unpackaged form. Binding and packaging is
mostly done by bairal and in some case it is also done by bepari.

Financing: Financing is of crucial important for agro-product marketing like any

type of product. The intermediaries face of lacking of sufficient finance. Some
times intermediaries buy product from farmer on credit. 60% of intermediaries do
operate their business by their self finance (Tasnoova et al, 2006). Risk Beari
ng: Risk bearing facilities are essential in any marketing activities. Insurance
policy system has not been developed yet in Bangladesh. Matin et al (2008) foun
d that many farmers sell their mango field to bairal to shift risk and bairal be
ar all risk of the orchard. Intermediaries bear the risk of price variation.

4.
Intermediaries are essential part of food supply chain in Bangladesh. They share
profit with producer. But farmer in Bangladesh cannot avoid intermediaries for
shifting their product to market. The reasons of dependency on Intermediaries ar
e as follows. Small Scale Farm: Small scale farming is better stewards of natura
l resource and contributes more to local community and economic development (Ros
set, 1999). The cultivation practice in Bangladesh is more or less small scale f
arming. The average size of land ownership is 0.6 ha (Weinberger, 2005) and prod
uce small amount of production. Intermediaries involvement can be attributed to t
he fact that average farmers marketable quantity is often small. It is not always
economic to employ some shipping mode to transport for such small quantity to t
he marketplace. Lack of Education: It is observed that education has negative im
pact on agriculture income. But education effect on nonfarm income (wage, trade
etc) significantly in Bangladesh. Education is required to raise total income of
farmer. Most of the villagers in Bangladesh are illiterate and they are not get
ting update information. Again also farmer have fear of marketing risk. They rel
y on intermediaries to send their product to market. Lack of Information Flow: F
or efficient marketing system, information of current situation in market is a v
ital ingredient. Agro business is not out of this group. Marketing information h
elps producer to make rational decision. Producer can make decision on the basis
of information on forecast of market demand and information on sales timing. Th
is information can help not to market glut again it enables the producer about t
he harvest time. Again understanding consumer need help to improve harvesting me
thod or produce desire type of crops. The most important information is price in
formation which enables fair price of produced crop. The literacy level of farme
r is very poor in Bangladesh. They cant read price in newspaper. Again most of th
e farmer cant afford television. Farmer gets information from trader or truck dri
ver who come to buy crop which may

be depend on traders benefit (Akand, 2006). Most intermediaries get market infor
mation through market visits, personal observations and from fellow traders (Tas
noova et al, 2006). Although Directorate Agricultural marketing, Government of B
angladesh is engaged in the task of price is available in their website. Present
ly FM radio, coverage is limited, broadcast daily market price. Limited Super Ma
rket: The development of supermarkets is a recent addition in the domestic retai
l section of Bangladesh. To date, there are about 30 supermarket stores operatin
g in the country as a whole, of which 22 are located in Dhaka. Although the cove
rage of supermarket chains is still very low, not even 1% of the retail sector.
Since supermarkets continue to play a minor role in Bangladesh, most vegetable p
roduce are sold either in the local markets, or to wholesalers who then transpor
t the produce to the city markets, i.e., Dhaka. Consequently, production is litt
le organized, and none of the farmers in our sample admitted participating in co
ntract growing arrangements. Wholesalers and small traders are the major players
in vegetable trade, capturing 96% of the market.

5. Problem that Retailer Face

In Bangladesh vegetables retailer face many problem. When we talk to them they t
old us about some problems. These problems are Vegetables retailer has to buy the
ir product in cash. They dont get any credit facilities from the whole seller.
Th
ey face to carry their product from whole sale market to retail market because t
hey dont have any permanent transport service. Their profit margin is very low. T
hey can save a little amount of money after sale a huge amount of vegetables.
Th
ey have limited amount of cash, so they cant buy vegetables as they required. Cus
tomer bargaining power is higher than the retailer.
Sometimes they not get appro
priate price. Many times the vegetables got damage then they have to count a hug
e loss. All times vegetables are not available in the markets. Price change of v
egetables in hour to hour basis so they cant set the fixed price of vegetables.
D
ifferent vegetables retailer buy vegetables in different price from different, s
o they face problem when they going to sell into same market.

6. Conclusions
Supply Chain system is not sound in Bangladesh. Growers are not getting full ben
efit of high food price due to deficient access to market information and undeve
loped infrastructure. There are insufficient well equipped wholesale market and
many intermediaries between producer and consumer. Inferior communication and tr
ansport condition and inadequate financial and information service also contribu
te to frustrated distribution of perishable food. Direct intervention of governm
ent involvement in vegetable marketing is minimal. Price is determined by open b
argaining by number of buyer attending in the market. Improving transport system
and minimizing the number of intermediaries in supply chain can increase the pr
ofit margin of farmer.